A local government think-tank says giving councils the power to balance their budgets over three years rather than one would avoid the need for dramatic cuts in services. The New Local Government Network says in a new paper that authorities should be able to use Keynesian economic policies to protect their communities from the recession.

In the paper, “In The Balance: Granting local authorities new financial flexibilities to cope with the downturn”, NLGN Director Chris Leslie says councils have to balance their budgets annually but the current economic climate requires them to have extra borrowing powers to invest in services. He urges the Government to amend the current Local Democracy, Economic Development and Construction Bill to introduce the change.

Funding for authorities is allocated over a three- year period but they still have to match income to expenditure each year. Chris Leslie wants councils to have the same ability as the Government to balance spending plans over a longer period and says they have earned the right to greater fiscal autonomy by demonstrating sound financial management and efficiency savings. Greater freedom, he argues, would allow councils to give council tax discounts in a particularly difficult economic year, hold on to staff, facilities and programmes which might otherwise be lost to the need to balance the books and challenge the Police, Jobcentre Plus and Primary Care Trusts to commit jointly to new programmes beyond core service provision.

Mr. Leslie said: “With the Budget suggesting great volatility in Government grant to local authorities in future years, we argue that multi-year balancing may be a necessary tool to avert waste and facilitate smoother planning, avoiding service quality ‘shocks’.”